nternship report on gohar textlle pvt. ltd

8/8/2019 nternship report on Gohar Textlle Pvt. Ltd.

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ON

Gohar Textiles Pvt. Ltd.

Waqar KhanM.Com-Finance

For the degree of Master of Commerce

At

Department of Commerce

Government College University

Faisalabad.

Copy right by Waqar Khan 2010

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ACKNOWLEDGMENT

All praises and thanks to Almighty Allah. The Lord and Creator of this universe by

whose power and glory all good things are accomplished. He is also the most merciful,

who best owed on me the potential, ability and an opportunity to work on this project.

I am grateful to my respected teacher Sir Sana Ullah who has guided me in each

and every step of this project. Indeed, without her kind guidance I may not be able to

even start this project. May ALLAH give her the reward which she deserves. I am also

grateful to all those members who are related to Gohar Textile Pvt. Ltd.

Despite of the most hectic schedule, Sir. Mustajab (manager Finance) helped me

so much. I'm really grateful to you Sir for clarifying my concepts and making me learn

from your experience. Whatever I learnt from you will definitely help me in my

upcoming study and the professional life ahead. Thank you so much for being so co-

operative and so helpful every time. I hope Sir I have been up to your expectations.

In the end, I am thankful to all my teachers and have a lot of prayers for them who

give me the knowledge and make me able to complete my masters degree. Here I havespecial thanks for Sir Sana Ullah whose supervision guided me to complete my final

project.

Waqar Khan

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DEDICATION

I dedicate my projects efforts to my PARENTS and respected

TEACHERS who taught and hold my hands on every step of my life.

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CHAPTER NO.1

HISTORY OF TEXTILE

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1.1 Vision of Textile Industry of Pakistan

1.1.1 Vision of Textile Industry:

An open market driven, innovative & dynamic Textile Sector, which is: -

I. Internationally Integrated

II. Globally Competitive

III. Fully equipped to exploit the opportunities created by the MFA Phase out and this

enables Pakistan to be amongst the Top Five Textile Exporting Countries in Asia.

While going through the draft summary report on Textile Vision 2005, the first and

immediate response is that after a long time a sincere effort has been made to revamp

textile industry in Pakistan. The enabling backdrop was termed a vital pre-requisite to the

viability of the strategy. Some of these factors are not controllable and there is still very

heavy reliance on the GOP support/incentives. Unless the industry is able to stand on its

own feet firmly, without the crutches of incentives/protection, it will be very difficult to

compete in the global markets.

The draft of Textile Vision 2005 was circulated after the stakeholders of the textile sector

attended the presentation of the strategy on April 14, 2000. This formed the basis of the

final deliberation. However, the document, in no way, represents the final policyproposals to the GOP by the Textile Sub-committee chaired by Tariq Sayeed Saigol.

Three different scenarios have been suggested for the strategy

1.2 Three scenarios of Textile Industry

1.2.1 Low road

I. Exports will maintain the historic growth rates

II. There will be no change in the product or the market mix

1.2.2 Do-able

I. Exports growth rate will match each importing country's growth rate of

unit imports

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II. Unit exports of garments to Middle East market will grow at 3 per cent

annually

III. Pakistan will capture 0.5 per cent share in the Japan and Hong Kong

markets

IV. Unit price of cotton yarn will grow at 3 per cent and that of fabrics will

grow at 4 per cent annually

V. Share of 100 per cent synthetic garments in the garments exports will

increase from current 3 per cent to 30 per cent, in line with the world trend

VI. 13 million bales of cotton will be consumed

1.2.3 High road

I. Value added products (garments and made-ups) will be the engine of export

growth (20% annually)

II. Export product mix will be balanced by giving extra push in the women and

woven garments

III. Fabrics exported will contain 55 per cent processed fabrics

IV. Total cotton production will be 16 million bales of which 13 million will be

consumed

Three different scenarios viz, Low Road-Do-able, High Road scenarios have been

proposed for the strategic development of the Textile Industry to give a quantum jump in

the export of textile products. An investment of approximately 5.00 Billion Dollars has

been proposed for the next four years time to achieve a minimum growth rate of 12% on

present export base.

1.3 Introduction of Textile Industry

Looking at the world as a whole a new and dramatic global order had emerged since the

end of the cold war, and is continuing to develop into the new century. Europe and North

America, and N.A.F.T.A. respectively illustrate the growing trend to create regional

economies. It is Asia however that is attracting global attention as the most dynamic

growth region in the world today and is likely to drive the world economic development

as we further move through the time.

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Despite of the tendency towards re-location, most developed countries have nevertheless

succeeded in maintaining a local textile industry, which is both viable and competitive at

international level. This is mainly due to their unprecedented efforts at modernizing and

restructuring the production process. The textile industry in developing countries has

increasingly placed emphasis on quality, the rapid response to growing demand and

innovation in the areas of fibers (micro fibers) and high value-added textiles (industrial

textiles).

The Textile Industry all over the world is trying to consolidate through re-adjustment

strategy. The markets have become very competitive. There is a fierce competition

amongst the low cost producers mostly in Asia to take up the share being lost by high

cost European Manufacturers.

Pakistan has to compete with countries, which are similar in factor conditions and

comparative advantages. The close competitors are India, China, Turkey and Indonesia,

now a days Bangladesh is emerging a close competitor in this sector. Due to cotton price

edge the Indian Textile Industry had been able to compete us in our traditional yarn and

cloth markets.

These market changes are developing pressure on our Textile Industry and the industry is

in the process of transition for a structural change to rebuild its competitiveness. Such

structural changes are always painful. The industry in general is not in a comfortable

position. Further the declining profitability has aggravated the credit access problems and

ability to finance new investment, which is so important for improving quality and

productivity. Excepting few cases no attention has been given to skill development both

in manufacturing and marketing. Lack of product diversification and passive selling has

kept industry to low market segments with earnings depressed.

1.4 History of Textile Industry of Pakistan

Increase in the cotton production and expansion of textile industry has been impressive inPakistan since 1947. Cotton bales increase from 1.1 million bales in 1947 to ten million

bales by 2000. Number of mills increased from 3 to 600 and spindles from about 177,000

to 805 million similarly looms and finishing units increased but not in the same

proportion. It employs 50% of industrial labor force and earns 65% foreign exchange of

total exports. Pakistans textile industry experts feel that Pakistan has fairly large size

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textile industry and 60-70% of machines need replacement for the economic and quality

production of products for a highly competitive market. But unfortunately it does not

have any facility for manufacturing of textile machinery of balancing modernization and

replacement (BMR) in the textile mills which need to think about joint ventures for the

production of complete spinning units with china, Italy and production of shuttle less

looms (Projectile) with Korea, Taiwan and Italy.

Cotton textile industry has been premier industry in Pakistan and a major source of export

earning and employment. It also helps in value addition to the manufacturing sector of

the economy. During the six years between 1993 and 1998, production of yarn (in

quantity terms) registered a steady annual growth rate of 302% in Bangladesh and 405%

in India.

On the contrary, Pakistan registered a growth rate of 101% per annum in yarn production

although it ranked third after China and India in the global yarn production during the

same six years. In exports, while Taiwan, India and the republic of Korea registered an

annual increase of 18.1%, 27.7% and 5.4% respectively during 1993-1998, Pakistan

registered a negative growth of 4.8% one important development was that till 1997,

Pakistan was the worlds largest exporter yarn followed by India.

However, in 1998, India gained the NO 1 position, leaving Pakistan at NO 2 In the case

of cotton cloth production, a number of Asian countries have been emerging in the

international market to compete with Pakistan. These countries are Bangladesh, India,

Taiwan, Indonesia, Thailand, Turkey, Sri Lanka and Iran. The above-mentioned

presentation in the context of international scenario highlights the adverse position of

Pakistans textile industry when is likely to continue further following the full

implementation of WTO agreement from 2005 onwards when an era of free trade will

start globally. Notwithstanding the above fact, current stagnation in the local textile

industry can be overcome through efforts, consistent with charges occurring in the

international market.

It must be appreciated that all successive governments since the birth of cotton textile

industry in Pakistan have been encouraging the textile exporters to penetrate into new

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market and also to broaden the base of exportable commodities by including value added

textile goods so that reliance on exports of cotton, cotton yarn and coarse fabrics

gradually become minimal.

Reflecting on the state of affairs, Abid Chinoy, Pakistan cloth merchants Association

(PCMA) Chairman, Appreciated governments efforts to encourage new exports and

finding new markets, which need aggressive export marketing. The steps taken on the

monetary front, such as the frequent devaluation of Pak rupee in terms of dollar could not

improve the cost competitiveness of exportable products due to increase in prices of the

local and imported inputs of the local textile industry, and also due to inelastic demand

for the Pakistans exports.

It has been rightly mentioned in the latest stage bank of Pakistans annual report (FY01)

that, Over the years Pakistans exports receipts have been vulnerable on account of the

narrow base of exportable items, concentrated markets and low value addition this

indicated that the growth in the countrys overall exports, including textile products

which contributed more then 60% of total export receipts each year, could to be related

some cosmetic and ad hoc measure like devaluation of Pak rupee and concession export

credits. The first textile commission, which was constituted by the first material law

government in 1960 had, inter-alia, recommended that an economic size textile unitshould preferably have 25,000 spindles and 500 looms. No new mill with only 12,500

spindles and without looms should be sanctioned. However, no need was paid to the

advice by the sanctioning authorities with the result that an excess capacity had tented to

build up in the spinning sector.

During the period 1973 to December 1992, some 71 spinning units with 1,136, 835

spindles, 6,600 rotors ands 7,329 looms were closed down. In 1992, a foreign consultant

form was hired by the government to look into the stagnating conditions in the local

textile industry. One of the observations of the foreign consultant was Pakistan has

failed to make real progress in the international market and is being over taken by many

of the neighboring competitor countries. The spinning sector, traditionally the core of the

industry, is already in the crisis with many spindles lying idle and mills being forced to

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close. Worse still, this sector will be hit by the projected decline of its major markets in

Japan and Hong Kong in the coming years.

Another important strategic recommendation given by the foreign consultant very much

relevant to the current conditions: It is vital that companies play very positive role in the

markets, which each one having its own marketing activity, whose job is to understand

the need of the customers and the ever changing competitive dynamics of the markets. In

order to improve exports, Pakistans Readymade Garments Manufacturers and Exporters

Association (PRGMEA) has urged the commerce minister Abdul Razzak Dawood to set

up an Apparel Board for the promotion of export of woven and kit garments which fetch

US$ 2.5 billion foreign exchange for the country.

The industry experts are of the opinion that in the order to have a strong industrial base,

Pakistan economy need investment upswing. Pakistans economic growth performance

during recent years has been dismal: as against the average growth rate of 6.1% in the

1980s, the half and 4.0% in the 2nd half of the 1990s. The major micro-economic

instability factors like high inflation rate, budgetary deficit, continuous depreciation of

rupee, economic sanctions, etc. could not help the investment process. Such an

environment cannot be conducive to investment and growth.

Exporters of textile products have found the target of US$ 10.4 billion set by the

government for the year 2002-2003, as achievable and termed it a realistic approach. The

textile sector which constituted 69% of total export during 2001-2002, believes that

enhanced quota by the European Union and Turkey would make this possible to fetch

another US$1 billion this year.

The rise in export of value-added products from Pakistan was another point of

encouragement for the textile sector. The export of value-added products rose to 57.4%

from 53.9% last year-a clear sign that we are moving in the right direction, said the

Chairman of all Pakistan textile mills association. The trade policy is considered an

acceptable paper, but in the industry does not fine anything that could lead to a high level

exports achievement and remove trade imbalance.

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Pakistans textile sector earned US$5.77 billion during the outgoing year, compared with

US$5.577 BILLION OF 2000-2001 indicating a growth of 0.69%. Textile vision 2005

has identified the present status and opportunities to make in roads in conventional and

hew markets and has developed sectoral recommendations, hence the sectoral committees

set up by the federal textile Board (FTB) would play an important role be ensuring the

availability of quality raw materials on competitive prices and improvement in designing,

and would adopt quality standards and increase productivity levels. It would attract

foreign brands and promote Pakistani brands with world-class standers.

1.5 Structure of Textile Industry

According to IGATEX Pakistan which took place in Karachi, Pakistans largest city, and

is slated to return in 2008 that the republics textile and apparel industry is consisted ofginning, spinning, man-made fiber, weaving, finishing, apparel, terry towel, tarpaulin and

canvas, and knitwear machinery sectors? The textile and apparel industry as a whole

employed approximately 40 percent of total industrial workers and accounted for 46

percent of total manufacturing.

There were 1,221 ginning units, featuring an installed capacity of 20 million bales of

cotton. The spinning sector comprised 408 spinning units, with an installed capacity of

157,143 rotors; and 50 composite units, with an installed capacity of 10.1 million

spindles. The countrys 10 man-made fiber units had an installed capacity of 660,000

tons.

While the shows organizers did not detail the number of weaving units in their report,

the Pakistani governments Board of Investment reported 124 large and 425 small

weaving units, with a total production capacity of 4.4 billion square meters of fabric. The

show report also did not include the installed capacity for the 106 finishing units in the

organized sector and 625 finishing units in the small-scale sector. However, the

investment board noted a total finishing capacity of 4 billion square meters.

With regard to finished textile goods, the countrys 5,000 apparel units featured an

installed capacity of 450,000 sewing machines, show organizers reported. The installed

capacity for Pakistani knitwear manufacturers numbered 12,000 machines. Tarpaulin and

canvas production capacity totaled 100 million square meters, while installed capacity of

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terry towels totaled 7,500 looms. In contrast to IGATEX Pakistans post-show report, the

International Textile Manufacturers Federation (ITMF), Switzerland, in its 2005

International Textile.

1.6 Structure in disparity with other countries

Machinery Shipment Statistics report, noted the countrys installed spinning capacities

reported in 2004 9.7 million short-staple spindles, 35,000 long-staple spindles and

150,700 open-end rotors. In comparison to other industries in Asia and Oceania,

Pakistans short-staple capacity that year ranked third behind mainland China and

India, in that order while open-end capacity was fourth following mainland China,

India and Uzbekistan. Long-staple capacity in the republic came in 11th, tying with

Malaysia.

Installed weaving capacities in 2004 reported to ITMF totaled 24,000 shuttle less looms,

225,000 shuttle looms and 50,000 filament weaving looms. The shuttle less capacity that

year ranked sixth among other industries in Asia and Oceania; shuttle capacity was

second, behind Mainland China. Likewise, Pakistans filament-weaving capacity came in

second, following Mainland China and tying with Thailand.

On the other hand, the Karachi-based All Pakistan Textile Mills Association (APTMA), a

national trade association promoting 360 textile spinning, weaving and composite mills in

the organized sector, reported the total installed capacity for its member mills numbered

8.8 million spindles, 65,580 rotors and approximately 10,000 looms. There were 292

APTMA spinning mills, 40 weaving mills and 28 composite mills, which featured

facilities that can handle a variety of processes under one roof. Among the products

produced in APTMA mills were open-end and spun yarn; greige, printed and dyed

fabrics; and bed linens.

1.7 Government Initiatives

In 2005, the Pakistani government created a special textile sub-committee in order to

formulate a new textile strategies and policy in the hopes of revamping the textile

industry. The sub-committee submitted a report entitled "Textiles Vision 2005" which

included a number of recommendations including improved product quality, equipment

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upgrade, developing human resources, aggressive targeting of new markets and

development of high-powered leadership for the textile sector.

1.8 Exports

Cotton and yarn are Pakistan's primary textile exports. The textile industry accounts for

over 60 percent of Pakistan's total exports. The All Pakistan Textile Mills Association is

the organization that regulates the industry, which is currently facing a number of

challenges, including the need to improve quality.

1.9 Competition

Pakistan must compete with other producers similar in conditions and comparative

advantage. The Pakistani Textile industry's biggest competitors are China, India,

Indonesia and Turkey. The cost of power in Pakistan is comparatively high.

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CHAPTER NO.2

INTRODUCTION OF GOHAR TEXTILE

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2.1 Introduction

Goar Textile Mills was incorporated in 1993 in the most renowned textile city of Pakistan

i.e. Faisalabad. Ever since its formation it is exporting its total production to the

International Markets.

Gohar Textile Mills (Pvt) Ltd is a group that is expanding from a modest base on a very

consistent & practically enviable growth rate. We are a supply partner for businesses who

value the quality and like to enjoy it on a consistent basis.

2.2 MISSIONSTATEMENT

GOHAR aims to be a world class textile organization producing diverse range of

products for the global textile market. GOHAR seeks to achieve customer delight through

excellence in manufacturing & customer service based on creative combination of state

of the art technology & human resources. GOHAR is committed to be responsible

corporate citizen

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2.3 Organization Profile

Company information

Name :- Gohar Textile Mills (Pvt) Ltd

Chairman and chief executive officer

Ch. Maqbool

Ch. Liqat Ali

Directors

Liqat Ali

Gohar Mustafa

Aftab Gohar

Director Operation

Aftab Gohar

Chief finance officer

Sh. Asif

Auditors

TMC

Bankers

Habib bank Corporate

Alflah Bank

Allied Bank

Head office

208- Chak Road, Zia Town, Faisalabad

Mills

3-Km Chak Jhumra Road, Khurrianwala, Faisalabad

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2.3.1 Organizational hierarchy chart

CHAIRMAN CUM-MANGING DIRECTOR

CORPORATE GENERAL MANAGERS

VICE PRESIDENT

MANAGERS (M1-M4)

EXECUTIVES (E1-E2)

OFFICERS (O1-O2)

STAFF (S1-S4)

SUBSTAFF

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2.4 Awards and Achievements

CurrentlyCertified forISO 9001: 2000

CurrentlyCertified forOekotex

Working for the following certificationsC-TPATWRAP ISO 14000

2.5 Product Line

Gohar Textile Mills produced different high quality export oriented products to the

international market. These are as under.

Quilts(Comforters)

Bed linen

Kitchen linen

Processed fabrics

Grieg Fabrics

We are the manufacturers of synthetic hollow fiber filled duvets, pillows and mattress

protectors. Our fibers are processed according to modern-world health & safety

standards.

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The Variety of patterns that can be quilted is countless. Automatic size and measurement

control feature are built into the machine.

100% product inspection for quality is how we ensure our claim of consistency on high

standards.

At Gohar we supply an exotic collection of exquisitely designed bed linen to turn your

bedroom into a paradise of luxurious comfort.

In-line inspection while the product is still on the machine reduces rework cost and time.

Various types of button attachment are available through the specially designed

machines.

Here again the 100% of the product is inspected for even the most minute faults or

deviation from the specifications.

At the packing stage the affixing of stickers and their positions are specially observed.

2.6 R&D Department:

In order to achieve and maintain market leadership, we have invested significantly in

extensive research and development facilities to stay abreast of latest trends in print and

fabric confection we get consultation from European designers and even our

representatives visit various top-of-the-line stores in foreign markets regularly. That

market data is then converted into our own registered designs through our R&Ddepartment and is offered to our customers.

2.6.1 Quality Policy

To develop and maintain a consistent quality standard for our customers through reducing

the tolerances to the minimums that are practically possible. We fight and win the quality

war and not the price war.

2.6.2 Quality Assurance/Lab:

The equipments are calibrated after a specific time period to maintain the stringent testing

conditions. Periodic maintenance of individual machines is defined and is carried out

accordingly on time and are monitored through the ISO systemization. Traceability of the

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produced article with the machinist and the machine numbers is another feature to have

the quality assured.

Customer standards and procedures are carefully documented and administered through

the merchandizing team.

We have been approved over the years in quality audits by our customers like IKEA,

M&S and others.

2.7 Shipment Efficiency

Critical paths are made and monitored by the PPC department to ensure timely handlings

of the orders.

Critical paths of each order / Job are prepared and are sent to customer so that both thesides abide by these to achieve timely shipments

2.7.1 Sales Figure

Gohar Textile Mills last years annual turnover was US $ 24 Million. This has seen a

consistent double figure growth in the last three years respectively.

2.7.2 Strength

No outside financing so we can under take big orders for longer periods without

having to think about any financial constraints.

High Cumulative Customer retention rate since the start of operations

Sustained growth rate of annual sales turnover.

Consistent Quality ; Timely shipments

2.8 Major Customer

The industry leaders who are our top four volume customers are,

IKEA Europe.

Metro Group Europe.

Marimac Canada.

PID Designs Canada

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2.9 Exhibition

We are exhibiting at Heimtextil Frankfurt for the last 10 years. Our Stand No is Hall

10.1 B 70 for the year 2008-2009 Show

CHAPTER NO.3

BUSINESS OPERATION

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III.1 Business OperationIn any textile following are the elements of a business operation

Spinning

Weaving

Grey Room

Processing

Singeing

Desizing

Scouring

Bleaching

Printing

Dyeing

Finishing

Folding

III.2 Spinning Department:

Gohar Textile Mills (Pvt) Ltd has two spinning units situated in Faisalabad. These units

are equipped with the latest machines in all of their departments. In the spinning units the

fiber is converted into yarn, and as this the quality of yarn is very important in the textile

sector so spinning units have a lot of importance.

Generally the spinning mills mechanism is very similar. It starts from the mixing

department where the bales of cotton are mixed and at that section the most visible

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impurities are taken out. This mixed cotton is then taken to the blow room by a machine.

After going through a process it is taken to the card room for the next process.

After the card room the route is taken by keeping in view that whether carded yarn is the

end product or the combed yarn. The combed yarn is of better quality and its process is a

bit bigger than the other one.

For the carded portion the drawing breakers & drawing finishers are used to prepare the

fiber to a certain level so that the process on the simplex machine can be carried out. On

the other hand, in the combed portion, after the drawing breaker the cotton goes through

the lab former, & after that it goes through the combing machine, where the comber nail

and comber sliver are separated.

The comber sliver, after passing through the PC drawing & Drawing finisher goes to the

simplex machine. The product that comes from the simplex machine is then taken to the

Ring section where the yarn is to be made. Finally after passing through the auto cone the

yarn comes in the packing department. In Gohar the process of Ultra Violet Checking is

also practiced to ensure the quality of the yarn.

As this process is very important so there are some common parameters on which the

quality of yarn is judged. These parameters have been listed as below:

III.2.1 Important Parameters of Fiber:

Length

Strength

Micronaire value

Color grade

Neps / gram

Trash percentage

III.2.2 Important Parameters of Yarn:

Yarn count

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Strength LCSP

U percentage

Thin Places

Thick Places

Neps

IPI (Imperfection)

III.3 Weaving Department:

The weaving units are really very well equipped with the latest machinery to make the

best possible product for the customer to gain the customer satisfaction.

Most of the machines in the weaving unit are of new technology & mill has a very good

check on the quality of fabric produced by its Quality Control department.

The end product of the spinning unit is the starting point of the weaving unit. When the

cones of the yarn are brought to weaving unit, it is then taken to the warping zone in

which the beams are prepared.

These beams are then taken to the sizing section where the different chemicals are

applied to the yarn so that the weaving of the fabric can be done with the minimum

breakage of yarn. After sizing the process of drawing inn is applied so that the yarn could

be converted into fabric.

After the drawing inn the beams of the yarn is then taken to the Sulzer Looms so that the

yarn is converted into the weave product. When the greige is made, then it is taken to the

inspection department, where a lot of quality check is done. At the first step the fabric is

classified into two types, i.e. A grade & D grade.

The D grade fabric is either used in the B grade sale or in gathering of the fresh pieces.

While the process of A grade fabric is a bit longer.

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The A grade fabric after mending, goes to the checking machines, from where it is taken

to the rechecking machines. After rechecking either the greige is rolled or folded &

packed according to requirements of the buyer.

During all the above process, quality is the main purpose of the people. The weaving

units check the product quality as under:

TOTAL WEAVING CAPACITY 3,400,000 METERS A MONTH

Air Jet:

Tsudakoma Air Jet 24 machines of 130

Sulzer Air Jet L5100Model: 20 looms of 110 & 28 looms of 130

Tsudakoma Zax Air Jet 24 machines of 134

Total: 96Looms

Production capacity 800,000 Meters a month.

Sulzer Shuttless:

Sulzer PU Model

32 loom of 15310 loom of 130

8 loom of 110

Total: 50Looms

Capacity: 200,000 Meters a month.

Auto:

26 machines of 76"

26 machines of 105"

48 machines of 116"

100Machines

Capacity: 1,400,000 Meters a month. Power:

64 machines of 72"

24 machines of 96"

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150 machines of 108"

238Machines

Capacity: 1,000,000 Meters a month

Power:

64 machines of 72"

24 machines of 96"

150 machines of 108"

238Machines

Capacity: 1,000,000 Meters a month

III.4 Quality Control Department:

First of all the people of Gohar checks the quality of yarn before taking it into the

process. Following are the yarn characteristics that are checked before taking it into the

process:

Count Testing

Strength Testing

TPI

Hairiness Testing

Thick & Thin bases

At the warping section the following characteristic is checked:

Breakage Report

When the sizing process is applied, the following two tests are applied:

Abrasion Test

Strength Test

After completion of the greige the gsm test is applied so that to have the best customized

product. Finally in the folding section checks are applied at every step of the folding

process.

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III.4.1A few of the main testing equipments that we have available at our lab are:

1. Data Color 650 Series Model 2006

2. HT Dyeing Machine

3. Lab Dyeing Padder

4. Crock Meter

5. Nu Martindale Pilling tester

6. Fume Cabinet

Three lot samples from minimum every 3000M is taken and is tested for

construction, composition, count, GSM, Tegwa, Absorbency, pH, Pilling,

Whiteness, Wet and Dry washing and rubbing results. All these results and then

logged for order history and for improvement in future handlings

Capacities:

Confectioned (Non Filled)

Sheet Sets. 200,000 sets a month

Curtains. 100,000 pairs a month

Other Products whose production levels vary are Kitchen Linen. (Complete Range)

Pillow Shells.

Sofa Cover.

Confectioned (Filled)

Quilting. 120,000 pieces a month

Pillows. 50,000 pieces a month

Chair Pads. 30,000 pieces a month

III.5 Processing Department:

Processing Unit of every textile mill has a paramount importance because it actually

provide the finish fabric product which is either sent to customer either as a piece good or

as made up after converting the fabric into the required stitched product. The processing

unit of Gohar comprises of the following department:

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Bleaching Department

Finishing Department

Printing Department

Dyeing Department

Folding Department

Quality Control Lab

Digital Design Studio & Engraving Department

Sample Room

Production & Planning Department

III.6 Bleaching Department:

The bleaching department of Gohar is equipped with the latest machinery to compete

with the market. Bleaching department has the following machines:

Singeing & De-sizing:

Water Mangle:

The above are the machines & a very brief overview of the machines. The bleaching

department is like a back bone of the processing unit. After weaving mill, the fabric is

brought to the bleaching department where it is prepared on the above machines so as to

be prepared for the Printing or Dyeing.

Current capacity:

Current capacity of bleaching is 70,000M per day and another 60,000M per day capacity

has been added since December 2006. All our bleaching method is Hydrogen Peroxide

based

The Quality Control people ensure the Quality of work in the Bleaching to fulfill the

collective goal.

III.7 Printing Department:

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The Printing department of Gohar is well established. It has one latest rotary. It is a

Reggiani 2005 Model Machine. It has 15 color options. Working width is 3.2 Meters and

the capacity is 40,000M per day. We are able to do the three standard design repeats

(namely 640mm, 819mm, and 914mm). The mesh categories that we can do are 80, 125

and 165.

The Printing department of Gohar is working at its best & producing really good stuff.

After the printing from the rotaries, the route of the fabric depends on the dye class.

If the reactive dyes have been used, then the fabric will be taken to first of all Ager

Machine & then Goller Soaper Washing, then to Stenter finish & finally to the calendar.

On the other hand the fabric treated with pigment dye is taken to the curing machine &

from there it is taken to the calendar after the required stenter finish. Now in the

following line, well see the specifications of the Curing & Ager Machines:

Curing Machine:

Ager & Curing Machine:

III.8 Curing Department:

Our Curing machine is equipped with Thermo-Oil Boiler and it has the daily capacity of

60,000M

III.9 Finishing Department:

Finishing department of any textile mill has a very significant importance because it acts

like a hub in the Processing. Almost every fabric which goes through processing unit, it

has to be passed through the finishing department.

The finishing department of Gohar Processing unit is famous for its quality work. It

comprises of many latest machines which includes Stenters, Cylinders, Raising Machines

& Sanforizing Machine.

Types of Finishes:

There are two major types of finishes:

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Chemical Finishes

Mechanical Finishes

The finishes in which no chemical is used is called the mechanical finish, a very goodexample of mechanical finish is Calender Finish. On the other hand the finishes through

stenter are known to be the chemical finish. The finishes are of the following types:

Normal Soft

Super Soft

Chintz

Anti Pilling

Anti Wrinkle

Water Proof

Easy Care

Soil Repellent

Sanforizing Machine:

The Sanforizing machine is used for relaxing the shrinkage of warp. The machine

possessed by Gohar has a workable width of 114. It is basically used either on customer

demand or in case of Garments. The standard is 5%. Gohar has one Sanforizing machine

in its processing unit.

Raising Machine:

This basically means to raise the fibers from the surface of the fabric. The machine

possessed by the finishing department of Gohar has a workable width of 114. Gohar has

one raising machine in its processing unit.

III.10 Calendaring Department:

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Rameisch Guraneri 2005 Model machine customized for High Temperature and High

Pressure which is very suitable for maximum Chintz finish. Heat source for this machine

is Thermo-oil

III.11 Folding Department:

The folding department of the Gohar has a daily production of 1,00,000m. The folding

department is the last department of the Processing Unit. After the folding unit the fabric

is transferred to GSC.

The folding department has two kinds of machines; the kind is rolling machine while the

other kind is of folding machines. It depends on the requirement that which kind of

machine would be used.

In the folding department of Gohar latest 4 score method is used for the inspection

purposes. Quality checks are made at every step of processing unit.

III.12 Engraving:

The Engraving Department of Gohar Textile Mills (Pvt) Ltd is equipped with the latest

machinery along with the manual machinery for the process of exposing.

In the Engraving Department of Gohar, the screens are generally prepared which are then

used in the printing process.

Sizes of the Screens:

Following are the three repeats of screens which are used in the Engraving Department:

640mm

820mm

Similarly the widths of the screens are of the following five kinds:

2650mm

1850mm

1620mm

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The selection of the screens depends on the design requirement of the print. The most

important thing which should be kept in mind is that only one screen should be used for

one color that means the number of screens will be equal to the number of colors whichwill be used during the printing process.

III.12.1 Coating Stage:

The first step which is taken in the formation of the screens is to coat the screen with

SCR 100. This coating is done for the purpose of blocking the meshes of the screen so

that the required king of design can be made through the screen. The coating of the

screen takes almost 8-9 minutes.

III.12.2 Heating Stage:These screens are then heated in the ovens so that to carry out the process in the best

possible manner. When the screens are heated in the proper way then they are taken to

the exposing machines. The heat is provided to the screens so that to fix the SCR 100 so

that the exposing stage should be started.

III.12.3 Exposing Stage:

Gohar Textile Mills (Pvt) Ltd has two exposing machines, one of them is manual and the

other is fully automatic. The automatic machine is the wax jet. The process of exposing

stage is different for both the machines.

In the process of Manual Machine, it is quite a time taking process. In this machine, the

presence of machine operator is very important; otherwise the time for each screen will

be higher than the original one.

Earlier most of the work was done through this machine but now the major load has been

shifted to was jet. Irrespective of these facts the importance of this machine is still

there.

All sizes and widths of the screens can be prepared through this machine. Basically the

manual machine is used for the word of design studio.

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The Wax Jet machine is fully automatic. The work done through the digital design

studio is done through this automatic machine. The speed of exposing through this

machine is relatively higher than the manual machine because there is not such need of

operator at every stage of the exposing.

The process at this machine does not effect because of the presence of the operator. The

exposing is being done through the wax on this machine that is why it has such a name.

The mechanism of this machine is that the machine is linked with the digital design

studio, so the operator can access any of the prepared design in the studio. Then the wax

is applied on the screen in such a way that the wax is applied on that place from where

the operator want to open the meshes. Then the lighting process is done i.e. the screen

goes through high power light.

The result of this process is that the place where only coating is there and there is no wax,

at these places the coating got fixed in such a way that the meshes are blocked in a better

way. After this Exposing stage the screen is taken to the next stage.

Gohar has ordered for ink jet machine which will enhance the production capability of

the engraving department.

III.12.4 Washing Stage:

The screens are then taken from the exposing machines to the washing area. This is the

area where the screens are washed so that the black portion can be washed from the

screens. This is also called the Developing Stage. The screens are then kept on the light

stand to see that whether the results are satisfactory or not. When the staff feels that the

design is satisfactory then they send this screen to the heating machine for curing.

III.12.5 Curing Stage:

The curing is being done through an oven. The screens are kept about 20-25 minutes in

the oven. This heat fixes the design on the screen so that after the final touch the screen

can be sent to the next department.

III.12.6 Enduring Stage:

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During this stage the ring type iron is fixed on both the sides of the screens so that the

screens could be taken to the printing department for printing.

III.12.7 Touching Stage

During the touching stage the final work is done. In this stage if there is any extra patch

on the screen, then they are blocked with SCR52 so that the correct effect can be drawn

on the fabric. This is the final stage of Engraving Department. After this step, the screens

are then taken to printing department.

III.13 Design Studio

The design studio is a very important department of Processing Unit. The importance of

design studio is because of the reason that without its right work nothing correct can be

done. The presence of good design studio is very important for any good textile export

organization.

The buyer sends the desired design in the following forms:

Through Sketches

Through Fabric Sample

Through CD

swages

Now after having the concept of design, it is then the responsibility of design department

to make the screen design, to select the sizes of the screen, to select the repeats of the

screens and most importantly to make the films and designs so that to have the same

designs during the printing process as required by the buyer.

In the digital design studio the work is being done through the latest machineries and

software and dedicated and educated persons are there for the purpose carrying out the

process. All of the work in this studio is done on the latest machines and the work can be

accessed through the Wax Jet machine.

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In the other design studio, the work is being done through the experienced persons. In

that studio the guideline is the first thing which is made at the start. After this step, there

comes a chain in the design studio such as to separate the colors up to making the and

preparing the films which can be used in the engraving department.

III.14 Cutting departmentThe cutting department is the first department of GSC, which takes the fabric. The fabric,

which is to be stitched, is brought from the folding department to the cutting department.

In this department the fabric is cut according to the specifications & need. From the

cutting department the fabric is transferred to the store from where the fabric is issued on

the required floor according to the freezing plan.

The cutting department objectives

o Quality control

o Cutting

o Minimize Wastage

So cutting department was performing these responsibilities. Mr. Arif the Cutting

supervisor who shared the rules of cutting that is the foundation of the complete stitching

department. Those are

One: LENTH FOR LENGTH (L*L)

Two: WIDTH FOR LENGTH (W*L)

The Process flow of cutting department is as below

SAMPLE PROGRAMME CUTTING

Stitching Department (GSC)

Gohar has two stitching units.

1: One is situated in Kharurrianwala

2: The other is situated in Saeed Colony.

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75 helpers are daily wages working as quality checker in the whole stitching department.

200 stitching machines in the whole stitching unit. Every machine operator has a unique

no to find out the any type of the fault.

The objectives of the stitching department are

The cost minimization and

To minimize wastage

Best utilization of time

Quality control by line checker

Types of stitching

LOCK STITCH,

CHAIN STITCH,

TWIN NEEDLE,

WORK STATION

Blind stitch

Over lock

Flat lock

III.15 Dispatch Department

Dispatch department is performing two functions

WARE HOUSE,

MAID-UP DISPATCH

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Dispatch department is responsible to dispatch all types of Export after packing. It

depends on the marketing department when it should be dispatched. It is not necessary to

dispatch daily. Dispatch department is to pack and dispatch report preparation the prime

responsibility is to make maid-ups dispatch Report.

Dispatch Department has a continual liaison with Marketing Department and to fix

stickers according to the customer demand on the cartoons. The dispatch report also send

to the head office and as well as customer. Work force is use for loading or shipping in

container.

Container Type:

Twenty fitter lengths

Forty STD 8.5 feet length

Forty STD = 9.5 height.

From cutting to dispatch process is as below

Cutting stitching Packing dispatch

III.16 Commercial Department:

Along with the cutting section, there is another important depart named as commercial

department. The working of commercial department starts from receiving the stitching

programs. First of all, they see whether it is a new order or a repeat order. Then they issue

a demand order through their Purchase Department. It is the duty of the commercial

department to arrange all the equipment needed in the stitching unit for every bulk order.

The products which are the responsibility of the commercial department includes label,

fusing, polyester rope, stiffener, insert card, poly bag, stickers, size stickers, identification

sticker, barcodes, security codes etc.

A freezing plan is made every month so as to maintain & systemize the production

process. The stitching units of Gohar have latest and number of machines to fulfill the

customer need & requirements. Total number of helpers in on daily wages in the whole

stitching unit is 75. There are 200 machines in the GSC (general stitching company).

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Quality is most important consideration while production in Gohar. This is why the

quality checks in stitching department are of very good level. This shows that the Quality

checks in Gohar Sewing Units are of international standards.

As the stitching department is the last department before the dispatch of goods so a lot of

responsibility comes on its shoulders. There are sample rooms in the stitching units so as

to fulfill the sample stitching requirement for different markets to ensure customer

satisfaction.

So the above is the brief overview of some of the Gohar operations. Now well discuss

the chances of further improvement in Gohar.

III.17 Export Marketing Department:

The export department of Gohar Textile Mills (Pvt) Ltd is known to be the best

marketing department in the whole textile industry because of the commitment and

dedication of employees, the determination of work & the best management system.

Gohar Marketing has a very strong liaison with their customers around the world. Thats

why Gohar has different segments on the basis of different regions like North America,Australia and Europe.

Every region has a different Export Manager and its whole staff. The marketing

responsibility is not only to just sales and marketing it has also to find out new horizons

and new ways. Thats why Managers visit to new Markets around the world.

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CHAPTER NO.4

SWOT ANALYSIS

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4.1 SWOT ANALYSIS

4.1.1 Internal and External factors.

The Internal component o f A na ly si s i s c on ce rn ed w it h th e b as ic

strengths and weaknesses of t he o rgan izat ion. Thus, i t dep ic ts t he

internal environment of the company. The strengths of the company may

be i ts f inancia l or human resources, processes , opera tional methods,

market ing s t rategies, segmentat ion techniques or any exper t ise that the

company may f ee l a s i ts cor e compe tenc ies. Con tr ar y t o t hi s, any

d is cr epanci es i n t hese f ac to rs , a t t he s ame t ime, may become t he

weaknesses of the company. Hence, i t is the internal environment of the

company that shapes i t s bus iness s t rategies and provides di rection to

survive in the marketplace.

The external component deals with the factors that the company faces in

i ts external compet it ive environment . These factors are categor ized as

opportunities avai lable for the company in the market p lace and the

threats s t rained by i t s compet i tors . The opportunities of the company

may by i ts abil i ty to sat isfy the ever arising needs of i ts customers better t han i ts compe ti to rs , new ava il ab le mar ke ts , r oom f or s et ti ng new

operations, falling of barriers due to globalization trend etc. If a firm fails

to avai l the oppor tunit ies as soon as they arr ive , these oppor tunit ies

become threats for that company. This is because your competi tors wil l

ava il t ha t oppor tuni ty i n t he ir f ir st a tt empt and a tt ai n f ir st mover

advantage over you.

SWOT Analysis is a popular technique used to analyze some companys

present business si tuation. I t provides us with an overview of companys

major strengths and its critical weaknesses. The external opportunities and

threat s tha t the company faces in the external envi ronment are a lso

highlighted in this approach.

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4.2 SWOT Analysis

4.2.1 Strengths: No outside financing so we can under take big orders for longer periods without

having to think about any financial constraints.

High Cumulative Customer retention rate since the start of operations

Sustained growth rate of annual sales turnover.

Consistent Quality ; Timely shipments

Vertically integrated.

High quality products.

Excellent market image in the local and international market.

Highly qualified management.

Adequate financial resources.

Adopting information technology.

Loyal customers.

Skilled Labor.

Broad and motivational vision.

4.2.2 Weaknesses:

High employee turnover

Centralized management system

High cost of production.

Low production capacity.

De-motivated Staff.

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Less promotional activities.

Non-Corporative culture.

Insufficient benefits for the employees.

Stereotype machinery for processing.

Communicational gap among different departments.

4.2.3 Opportunities:

Zero sales tax to be charged on 12 textile raw materials

Can expand its division such as entering in weaving sector also.

Can introduce its own label in domestic as well in international market

Can capture new market segment.

Full potential of entertaining the local market.

Can reduce the cost by proper utilization of resources.

End of quota restrictions by the end of year 2004.

Can hire well-educated and experienced staff.

Globalization.

4.2.4 Threats:

Entry of new competitors just likes China & India.

Buyer need and demand changes.

Political instability.

Changing geopolitical situation.

Change of government policies.

Low price offered by competitors.

Globalization

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CHAPTER 5

WORK DONE DURING INTERSHIP

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During my Internship I have done in the following Departments.

Accounts

Marketing

Accounts Department

In accounts department, I managed to understand the flow oftransactions, preparation of vouchers, and ledger posting.

Preparation of vouchers

In account department under the supervision of concerned officer, I came to know

different types of vouchers being prepared and their process of preparation.

Vouchersare written evidence of any business transaction.There are different types of voucher being prepared by the account department Gohar

Textiles are as under

Cash payment voucher

Cash receipt voucher

Journal voucher

Now I will discuss each type of voucher

Cash payment voucher

These types of vouchers are prepared when cash payments are made against expenses.

I.e. repair; entertainment etc. In order to record the expense the following entry is passed.

Account code name of expense (debit) amount

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Cash Account (credit) amount

Evidence of expense is attached with the cash receipt voucher.

Cash receipt voucher

These vouchers are prepared when the cashier on behalf of Gohar textiles is receiving

cash. However, these types of vouchers are small in quantity because majority of

transactions are done by bank. On receipt of cash, cashier prepared the cash received slip.

Account officer prepared voucher on the basis of cash receipt prepared by the cashier. In

order to book the transaction the following entry is passed in the books.

Account code cash account (debit) amount

Income account or receivable account (credit) amount

Journal voucher

These types of vouchers are generally prepared in the following circumstances.

Purchase on credit

Written off assets

Rectification of mistakes or omission

Now I discuss one by one:

Purchase on credit

Generally raw material, stores, and spares are purchased on credit. In order to account

them for the journal voucher are prepared by the concerned officer

The following entry is passed.

Account code purchase account (debit) amount

Account code payable account (credit) amount

Copy of the Invoice is attached with voucher.

Written off Assets

These journal vouchers are prepared in order to charge the assets to expense for the

preparation of monthly Accounts.

To account for depreciation of Fixed assets

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Account code depreciation account (debit) amount

Accumulated depreciation account (credit) amount

To account for raw material consumption

Account code raw material concerned account (debit) amountRaw material store account (credit) amount

To account for store consumption

Account code store concerned account (debit) amount

Stores and spares account (credit) amount

To account for accrued expense

Account code expense account (debit) amount

Account payable account (credit) amount

Rectification of mistakes

In addition to above referred kinds of journal voucher is also passed rectify the mistakes

made in voucher preparation or posting

Marketing

the main purpose of this department is to locate buyers through agents. So marketing

starts from locating the buyers, making contracts, opening of LC, shipment, and in last

payment is received.

Learning as internee

Duties

As I told above that I had prepared voucher of different types then I used to take voucher

to Mr. Tahir, Mis. Shazia and Mr. Ramazan to audit and got back audited vouchers from

the audit. Copied checks whose payments were to be made on that date. Then I brought a

few times invoices for sale tax from marketing department. Maintained records of filing

with Mr Farooqui. Next In purchase department I had only worked for filling there goods

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received notes (GRN) and maintaining them in a serial manner. I have attended calls for a

person not seat or else.

Accomplishment

As an internee I have done all the works diligently which I have mentioned above.

Instead I had done other works as well which a person on the job never performs. Like

someone asks me to take vouchers audit like I am his assistant. I have done that and never

said no. as I have seen those employees which went to audit and the other asked bring my

voucher as well and the person says no. I have my own work you should batter go

yourself. That is the thing which I wanted to share in this regard. New knowledge

acquired.

New Knowledge acquiredOne thing regarding new knowledge is what I have shared accomplishments. Next one

important thing regarding knowledge acquired is that what you are studying is not related

to the job duties you are doing in future. You have to understand that work from stat in

case of an employee leaving a company and joining other he also will have to understand

in new company. I have got a lot of sense regarding in an organization where every one is

working out for cutting your roots. How to work in conservating environment. How to

behave in any situation? How to negotiate with any person on job?

Problems Encountered

Well I dont have to face as many problems as I will have to face when I will go on job.

First few days were hard but I cannot say there was any problem. Employees were very

cooperative and they asked me to ask as many times about things till you are not cleared

about that. They guided me on every issue and asked me as like a big brother to learn as

much as you can. I am really thankful to all of them.

Impact of experience on my careerThis experience definitely affects my career positively. As I would not have been come to

know about the atmosphere of any organization, this experience has told me a lot about

the environment of an organization and behavior of different type of people. All of this

edge goes to my institutes good understanding about students future.

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CHAPTER NO.6

FINANCIAL STATEMENTS AND ANALYSIS

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6.1 Financial Statements

6.1.1 Balance Sheet (Assets)

GOHAR TEXTILE MILLS (PVT) LTD.

BALANCE SHEET

AS ON JUNE 30, 2009

ASSETS 2009 2008 2007

Non-Current Assets

Fixed AssetsProperty, Plant and equipment 95,106,306 859,511,872 834,564,661

Capital work in progress 17,167,507 29,416,245 9,917,561

112,273,813

888,928,117

844,482,222

Long Term Deposits and

Deferred Cost

17,911,775 1,855,100 1,851,600

Due From Association 932,913,058 - -

Current Assets

Stores, spares and loose tools 5,371,789 22,059,708 21,923,660

Stock in trade 501,519,693 418,396,869 254,750,341

Trade Debts 325,722,287 179,273,728 230,280,445

Loans and advances 108,291,134 14,551,289 16,070,374

Deposits & Prepayments 1,520,559 634,052 475,251

Other Receivables 90,774,664 45,621,999 48,094,547

Cash & Bank Balances 5,862,001 12,269,150 25,341,111

1,039,062,127 692,806,795

596,935,729

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2,102,160,773

1,583,590,011

1,443,269,551

6.1.2 Balance Sheet (Liabilities)


BALANCE SHEET

AS ON JUNE 30, 2009

EQUITY & LIABILITIES 2009 2008 2007

Share Capital & ReservesAuthorized Capital1,000,000 ordinary shares of Rsof Rs. 100/= each

100,000,000

100,000,000

100,000,000

Issued Subscribed & Paid up Capital 40,649,500 40,649,500 40,649,500

Revenue Reserves 1,537,898,335 1,040,929,687 977,358,726

1,578,547,835

1,081,579,187

1,018,008,226

Surplus on Revaluation of FixedAssets

136,785,793

150,307,325

Non Current Liabilities

Long Term Loans 108,893,475108,893,47

5161,993,47

5

Liabilities against Assets Subject toFinance Lease 697,617 -

5,544,154

Due to Associate Undertaking 90,859,194 - -

Current Liabilities

Trade & Other Payable 111,904,367 78,746,596 50,187,799

Interest/Markup Payable - 2,938,326 1,785,003

Current Portion of Long TermLiabilities

91,258,285

58,665,991

42,981,012

Short Term Finance 120,000,000 105,000,000 -

Advances from customers - 264,209 -

Provision for Taxation - 10,716,434 12,462,557

Contingencies & Commitment323,162,65

2256,331,55

6107,416,37

1

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2,102,160,77

3

1,583,590,01

1

1,443,269,55

1

6.1.3 Income Statement


INCOME STATEMENTFOR THE YEAR ENDED JUNE 30, 2009

2009 2008 2007

RUPEES RUPEES RUPEES

Sales 1,685,690,136 939,447,389 1,106,826,330

Cost of Sales (1,337,574,966) (772,932,261) (924,243,329)

Gross Profit 348,115,170 166,515,128 182,583,001

Selling & Distribution Expenses (136,679,293) (53,845,099) (62,077,899)

Administrative Expenses (30,820,720) (23,493,925) (26,086,598)

(167,500,013) (77,339,025) (88,164,497)

180,615,157 89,176,103 94,418,504

Other Operating Income 113,018,209 54,304 25,463

Other Operating Expenses (293,887) (3,263,473) -

293,339,479 85,966,935 94,443,967

Finance Cost (12,529,084) (23,960,952) (16,077,485)

Net Profit for the year before taxation 280,810,395 62,005,983 78,366,482

Provision for Taxation (15,246,256) (10,716,434) (12,462,557)

Net Profit for the year after taxation 265,564,139 51,289,549 65,903,925

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6.2 Vertical/Cross-Sectional/Common Size Analysis Techniques

Vertical/Cross-sectional/Common size statements came from the problems in comparing

the financial statements of firms that differ in size.

In the balance sheet, the assets as well as the liabilities and equity are each

expressed as a 100% and each item in these categories is expressed as a

percentage of the respective totals.

In the common size income statement, turnover is expressed as 100% and every

item in the income statement is expressed as a percentage of turnover (sales).

6.2.1 Vertical Analysis (Liabilities)


Vertical Analysis (Liabilities)

EQUITY & LIABILITIES 2009 2008 2007

Share Capital & Reserves

Authorised Capital

1,000,000 ordinary shares

of Rs. 100/= each 5% 6% 7%

Issued Subscribed &

Paid up Capital 2% 3% 3%

Revenue Reserves 73% 66% 68%75% 68% 71%

Surplus on Revaluation of

Fixed Assets - 9% 10%

Non Current Liabilities

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Long Term Loans 5% 7% 11%

Liabilities against Assets Subject

to Finance Lease 0.03% - 0.4%

Due to Associate Undertaking 4% - -

Current Liabilities

Trade & Other Payable 5% 5% 3%

Interest/Markup Payable - 0.2% 0.1%

Current Portion of Long Term Liabilities 4% 4% 3%

Short Term Finance 6% 7% -

Advances from customers - 0.02% -

Provision for Taxation - 1% 1%

15% 16% 7%

Contingencies & Commitment

100% 100% 100%

6.2.2 Vertical Analysis (Assets)

Vertical Analysis (Assets)Increase or (Decrease) %age

ASSETS 2009 2008 2007

Non-Current Assets

Fixed Assets

Property, Plant and equipment 5% 54% 58%

Capital work in progress 1% 2% 1%

5% 56% 59%

Long Term Deposits

and Deferred Cost 1% 0.12% 0.13%

Due From Association 44% - -

Current Assets

Stores, spares and loose tools 0.3% 1% 2%

Stock in trade 24% 26% 18%

Trade Debts 15% 11% 16%

Loans and advances 5% 1% 1%

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Deposits & Prepayments 0.1% 0.04% 0.03%

Other Receivables 4% 3% 3%

Cash & Bank Balances 0.3% 1% 2%

49% 44% 41%

100% 100% 100%

InterpretationFrom the vertical analysis above, we can compare the percentage mark-up of asset items

and how they have been financed. The strategies may include increase/decrease the

holding of certain assets. We may as well observe the trend of the increase in the assets

and liabilities over several years.

6.2.3 Vertical Analysis (Income Statement)


INCOME STATEMENT

FOR THE YEAR ENDED JUNE 30, 2009

Vertical Analysis

2009 2008 2007

Sales 100% 100% 100%

Cost of Sales -79% -82% -84%

Gross Profit 21% 18% 16%

Selling & Distribution Expenses -8% -6% -6%

Administrative Expenses -2% -3% -2%

-10% -8% -8%

11% 9% 9%

Other Operating Income 7% 0% 0%

Other Operating Expenses 0% 0% 0%17% 9% 9%

Finance Cost -1% -3% -1%Net Profit for the year beforetaxation 17% 7% 7%

Provision for Taxation -1% -1% -1%Net Profit for the year aftertaxation 16% 5% 6%

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6.3 Horizontal Financial Statement Analysis

This technique is also known as comparative analysis. It is conducted by setting

consecutive balance sheet, income statement or statement of cash flow side-by-side and

reviewing changes in individual categories on a year-to-year or multiyear basis. The most

important item revealed by comparative financial statement analysis is trend.

A comparison of statements over several years reveals direction, speed and extent of a

trend(s). The horizontal financial statements analysis is done by restating amount of each

item or group of items as a percentage.

Such percentages are calculated by selecting a base year and assign a weight of 100 to the

amount of each item in the base year statement. Thereafter, the amounts of similar items

or groups of items in prior or subsequent financial statements are expressed as a

percentage of the base year amount. The resulting figures are called index numbers or

trend ratios. From the balance sheet statement in exhibit 1. The following indexed

balance sheet can be established.

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6.3.1 Horizontal Analysis (Liabilities) GOHAR TEXTILE MILLS (PVT) LTD.

Horizontal Analysis (Liabilities)

EQUITY & LIABILITIES Increase or (Decrease) %age

2008-2009 % 2007-2008 %

Share Capital & Reserves

Authorised Capital

1,000,000 ordinary shares

of Rs. 100/= each - - - -

-

Issued Subscribed & -

Paid up Capital - - - -

Revenue Reserves 495,728,528 48% 64,811,081 7%

495,728,528 46% 64,811,081 6%

-

Surplus on Revaluation of -

Fixed Assets (136,785,793) -100% (13,521,533) -9%

-

Non Current Liabilities -

-Long Term Loans - - (53,100,000) -33%

Liabilities against Assets Subject

to Finance Lease 697,617 - (5,544,154) -100%

Due to Associate Undertaking 90,859,194 - -

Current Liabilities -

-

Trade & Other Payable 34,397,890 44% 27,318,678 54%

Interest/Markup Payable (2,938,326) -100% 1,153,323 65%

Current Portion of Long TermLiabilities 32,592,294 56% 15,684,979 36%

Short Term Finance 15,000,000 14% 105,000,000

Advances from customers (264,209) -100% 264,209

Provision for Taxation (10,716,434) -100% (1,746,123) -14%

-

68,071,215 27% 147,675,066 137%

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Contingencies & Commitment -

-

518,570,762 33% 140,320,460 10%

6.3.2 Horizontal Analysis (Assets) GOHAR TEXTILE MILLS (PVT) LTD.

Horizontal Analysis (Assets)

Increase or (Decrease) %age

ASSETS 2008-2009 % 2007-2008 %

Non-Current Assets

Fixed AssetsProperty, Plant andequipment

(764,405,566) -89% 24,947,211 3%

Capital work in progress (12,248,738) -42% 19,498,684 197%(776,654,304

) -87% 44,445,895 5%

-

-

Long Term Deposits -

and Deferred Cost 16,056,675 866% 3,500 0.19%

-

Due From Association 932,913,058 - - -

Current Assets - -

- -Stores, spares and loose tools (16,687,919) -76% 136,048 1%

Stock in trade 83,122,824 20% 163,646,528 64%

Trade Debts 146,448,559 82% (51,006,717) -22%

Loans and advances 93,739,845 644% (1,519,085) -9%

Deposits & Prepayments 886,507 140% 158,801 33%

Other Receivables 45,152,665 99% (2,472,548) -5%

Cash & Bank Balances (6,407,149) -52% (13,071,961) -52%

346,255,332 50% 95,871,066 16%

518,570,762 33% 140,320,460 10%

Interpretation

As basis of Analysis, the analyst may seek variables which seem to improve or

deteriorate and bring a challenge to the stakeholders in their various decisions. Example

from the previous table one can ask the following questions?

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Why is there an increase in the stock of the company? Has the company changed

its inventory policy?

Why did taxation increase so tremendously? Were there any changes in taxation?

Is it reflected by the increase in sales? Profit?

Why is there an increase in the fixed assets and at the same time decrease in thelong-term debt? How were these assets financed?

6.3.3 Horizontal Analysis (Income Statement)


INCOME STATEMENT

FOR THE YEAR ENDED JUNE 30, 2009

Horizontal Analysis

2008-2009 2007-2008

Change%

Change%

Change

Sales 746,242,747 79% (167,378,941) -15%

Cost of Sales (564,642,705) 73% 151,311,068 -16%

Gross Profit 181,600,042 109% (16,067,873) -9%

- -

- -

Selling & Distribution Expenses (82,834,194) 154% 8,232,800 -13%

Administrative Expenses (7,326,795) 31% 2,592,673 -10%

- -

(90,160,988) 117% 10,825,472 -12%

- -

91,439,054 103% (5,242,401) -6%

- -

Other Operating Income 112,963,905208021

% 28,841 113%

Other Operating Expenses 2,969,586 -91% (3,263,473) 0%

207,372,544 241% (8,477,032) -9%

- -

Finance Cost 11,431,868 -48% (7,883,467) 49%

- -

Net Profit for the year beforetaxation 218,804,412 353% (16,360,499) -21%

- -

Provision for Taxation (4,529,822) 42% 1,746,123 -14%

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- -

Net Profit for the year after taxation214,274,59

0 418%(14,614,37

6) -22%

6.4 Ratio Analysis

Ratio analysis is one of the techniques of financial analysis where ratios are used as a

yardstick for evaluating the financial condition and performance of a firm. Analysis and

interpretation of various accounting ratios gives skilled and experienced analyst a better

understanding of the financial condition and performance of the firm than what he could

have obtained only through a perusal of financial statements.

59

RATIO

ANALYSISRATIO

ANALYSIS

LIQUIDITY RATIOS

Activity Ratios

leverage Ratio

PROFITABILITY

RATIOS


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6.4.1 LIQUIDITYRATIOS

Liquidity represents the ability of a company to efficiently and economically

accommodate deposits withdrawal as well as fund increase in assets. A company has a

liquidity potential when it has the ability to obtain sufficient funds in a timely manner at a

reasonable cost. Illiquidity is a primary factor leading to a Companys failure whereas

high liquidity helps otherwise weak institutions to remain funded during the period ofdifficulty.

Liquidity refers to the ability of a firm to meet its short-term financial obligations

when and as they fall due.

The main concern of liquidity ratio is to measure the ability of the firms to meet

their short-term maturing obligations. Failure to do this will result in the total

failure of the business, as it would be forced into liquidation.

I. Current ratio

II. Quick Asset to Deposit ratio

6.4.1.1 CURRENTRATIOThe Current Ratio expresses the relationship between the firms current assets and its

current liabilities.

Current assets normally include cash, marketable securities, accounts receivable and

inventories. Current liabilities consist of accounts payable, short term notes payable,short-term loans, current maturities of long term debt, accrued income taxes and other

accrued expenses (wages).

Current Ratio :- Current Assets

Current Liabilities

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Current Assets

2009 2008 2007

Stores, spares and loose tools 5,371,789.00 22,059,708 21,923,660

Stock in trade 501,519,693.00 418,396,869 254,750,341

Trade Debts 325,722,287.00 179,273,728 230,280,445

Loans and advances 108,291,134.00 14,551,289 16,070,374

Deposits & Prepayments 1,520,559.00 634,052 475,251

Other Receivables 90,774,664.00 45,621,999 48,094,547

Cash & Bank Balances 5,862,001.00 12,269,150 25,341,111

Total Current Assets 1,039,062,127.00 692,806,794.75 596,935,729.00

Current Liabilities

2009 2008 2007

Trade & Other Payable 111,904,367 78,746,596 50,187,799

Interest/Markup Payable - 2,938,326 1,785,003Current Portion of Long TermLiabilities 91,258,285 58,665,991 42,981,012

Short Term Finance 120,000,000 105,000,000 -

Advances from customers - 264,209 -

Provision for Taxation - 10,716,434 12,462,557

Total Current Liabilities 323,162,652.00 256,331,556.42 107,416,371.00

Particulars 2009 2008 2007

Rs. Rs. Rs.

Current Asset 1,039,062,127 692,806,795 596,935,729

Current Liabilities 23,162,652 256,331,556 107,416,371

Ratio 3.22 2.70 5.56

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INTERPRETATIONThis ratio shows that whether the current assets of the company are Sufficient to meet the

current liabilities or not. In 2006 it was 5.56 that shows low liquidity because this ratio is

above standard that is 2. In 2007 it was 2.70, that shows that firm use financing leverage

in 2007 and approximately to 3.32 in 2008, that shows that firm decrease its debt in his

total capital.

6.4.1.2 QUICKRATIOORTESTACIDRATIO

Measures assets that are quickly converted into cash and they are compared with current

liabilities. This ratio realizes that some of current assets are not easily convertible to cash

e.g. inventories.

The quick ratio, also referred to as acid test ratio, examines the ability of the

business to cover its short-term obligations from its quick assets only (i.e. it

ignores stock). The quick ratio is calculated as follows

Quick Ratio:- Quick assetsCurrent Liabilities

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Liquid Assets 2009 2008 2007

Stores, spares and loosetools

5,371,789 22,059,708 21,923,660

Stock in trade 501,519,693 418,396,869 254,750,341

Trade Debts 325,722,287 179,273,728 230,280,445Loans and advances 108,291,134 14,551,289 16,070,374

Deposits & Prepayments 1,520,559 634,052 475,251

Other Receivables 90,774,664 45,621,999 48,094,547

Cash & Bank Balances 5,862,001 12,269,150 25,341,111

Total Current Assets 1,039,062,127 692,806,794.75 596,935,729

Less:- Inventory501,519,693 418,396,869 254,750,341

Total Liquid Assets537,542,434 274,409,926 342,185,388

2009 2008 2007

Rs. Rs. Rs.

Current Asset- Inventory 537,542,434 274,409,926 342,185,388

Current Liabilities 323,162,652 256,331,556 107,416,371

Ratio 1.66 1.07 3.19

INTERPRETATION

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This ratio shows that how much quick assets are available to meet the demand of the

accountholders. This ratio was 3.19% in 2006 and decreased to 1.07% in 2007. It shows

that in 2007 the immediate liquidity position of the company was comparatively weak.

But it is good sign in 2008 that is once again liquid ratio is increasing.

6.4.2 Activity Ratio

If a business does not use its assets effectively, investors in the business would rather

take their money and place it somewhere else. In order for the assets to be used

effectively, the business needs a high turnover.

Unless the business continues to generate high turnover, assets will be idle as it is

impossible to buy and sell fixed assets continuously as turnover changes. Activity ratiosare therefore used to assess how active various assets are in the business.

Note: Increased turnover can be just as dangerous as reduced turnover if the business

does not have the working capital to support the turnover increase. As turnover increases

more working capital and cash is required and if not, overtrading occurs.

6.4.2.1 Receivable Turn Over Ratio

Annual Credit Sale-------------------------

Total Receivable


Rs. Rs. Rs.

Annual Credit Sale 1,685,690,136 939,447,389 1,106,826,330

Total Receivable 325,722,287 179,273,728 230,280,445

Ratio 5.18 5.24 4.81

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INTERPRETATION

This ratio measures the number of times, on average, receivables (e.g. Accounts

Receivable) are collected during the period.

In 2008 this ratio is decreased .06 from last year 2007. It shows that firm has change its

account receivable policy.

6.4.2.2 Receivable in days / Average Collection Period

The average collection period measures the quality of debtors since it indicates the speedof their collection.

The shorter the average collection period, the better the quality of debtors, as a

short collection period implies the prompt payment by debtors.

The average collection period should be compared against the firms credit terms

and policy to judge its credit and collection efficiency.

An excessively long collection period implies a very liberal and inefficient credit

and collection performance.

The delay in collection of cash impairs the firms liquidity. On the other

hand, too low a collection period is not necessarily favourable, rather it may

indicate a very restrictive credit and collection policy which may curtail sales

and hence adversely affect profit.

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Account Receivable /

Receivable in days :- ---------------------------- X 365Annual Credit Sale

Particulars 2009 2008 2007Rs. Rs. Rs.

Account Receivable X 365 118,888,634,75565,434,910,72

084,052,362,425

Annual Credit Sale 1,685,690,136 939,447,389 1,106,826,330

Ratio 70.53 69.65 75.94

InterpreationAs in 2005 average collection period was 76 days but it is decreasing with the passage of

time and in 2008 it is 70 days, which shows the efficiency of collection department. Our

sales are definitely increasing which is the core purpose of every organization.

6.4.2.3 Accounts Payable Turn over Ratio

Annual Credit Purchase

--------------------------------

Account payable

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Rs. Rs. Rs.

Annual Credit Purchase 1,337,574,966 772,932,261 924,243,329

Account payable 111,904,367 78,746,596 50,187,799

Ratio 11.95 9.82 18.42

Interpreation

A short-term liquidity measure used to quantify the rate at which a company pays off itssuppliers. Accounts payable turnover ratio is calculated by taking the total purchases

made from suppliers and dividing it by the average accounts payable amount during the

same period.

In 2006 firm pays payment to credit after 18 days, but in 2008 company pays payment

after 11 days. It shows that firm has enough resources to pay the payment of creditors.

6.4.2.4 Account Payable in days

Account payable

---------------------------- X 365

Annual Credit Purchase

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Interpreation

The average payment period ratio represents the number of days taken by the firm to pay

its creditors. A higher credit turnover ratio a lower credit period ratio signifies that the

creditors being paid promptly, thus enhancing toe creditworthiness of the company.

However, a very fa

nternship report on gohar textlle pvt. ltd

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